Will Former Volvo Styling Boss Design New Chinese Brand?

Peter Horbury, former Volvo design chief who was reassigned last year to work for Volvo’s Chinese owner in China, is likely to become head of design for a new brand for the Chinese market that plans to use older Volvo technology, two people close to the companies said.

Mr. Horbury’s “most pressing task,” according to one of the people who is close to Zhejiang Geely Holdings Group Co., which acquired Volvo in August 2010, would be to come up with a “distinctive” design direction for the new brand Geely and its Volvo unit plan to set up.

He has to design cars that are “sufficiently differentiated” from Volvo’s in order to keep the new brand from diluting Volvo’s premium image, the person said.

The challenge is Mr. Horbury would have to use Volvo technology that the Swedish brand plans to phase out in two to three years as it adopts newer, more advanced technology.

Geely and Volvo plan to establish the new brand, to be positioned between Geely’s low-cost mainstream brands and upscale Volvo itself, according to the individuals. The new brand is being set up as part of a new 50-50 joint venture the two companies are establishing in China in an effort to comply with Chinese government regulations that allow Geely to manufacture cars in China.

That careful positioning is critical because Volvo leaders worry such technology sharing with a Chinese brand would hurt Volvo’s premium image, although executives at Geely and Volvo have insisted that they are aware of Volvo’s concern and would aim to position the new brand in a market segment that is different from Volvo’s.

“Peter is going to make sure cars he is going to design for the new brand is going to look nothing like Volvo cars,” whose basic looks inside and out he oversaw as Volvo design chief over the recent years, one of the individuals who is close to Volvo said.

Geely is setting up the new China-only brand to keep Chinese regulators happy, as the Hangzhou auto maker tries to establish a bigger foot print in China for its Volvo unit. After acquiring the brand, Geely has tried to have Volvo establish manufacturing plants in China independently, but the idea was rejected by China’s central government policymakers.

That’s because those regulators consider Volvo a foreign auto maker, even after it was taken over entirely by Geely, and asked them to comply with regulations governing foreign auto makers setting up manufacturing capacity in China. By rule, foreign auto makers are required to form a usually 50-50 joint venture with a Chinese auto maker in order to produce cars in China.

To comply and build vehicle-assembly factories in China, Geely and Volvo earlier this year filed an application with China’s central government to set up an equally owned joint venture. As part of this arrangement, the two companies are also required to set up a new China-only auto brand, which is likely to become Mr. Horbury’s new responsibility.

According to one of the individuals, Volvo is alarmed by the development and is helping Geely with the new brand only because it is required by the Chinese government. “We’d rather not help Geely with this new brand if we had a choice,” he said.